Pay Attention: Co-Living Will Not Disappear into the Night

Commercial real estate has an entirely new asset class to contend with: coliving.

When my peers and I first heard talk of coliving, most of us sneered.“Only millennials could live like that!,” we thought. Coliving would, like the ill-fated Webvan, become nothing more than an industry footnote. Both ideas didn’t make sense to many of us—we could scarcely imagineordering groceries onlineas see cohabitation taking root in our industry.

But the more I studied it, the more I spoke with the people blazing the trail, the more I realized this was no passing fad. Yes, the convenience, affordability, and communityembedded in modern coliving modelsappeals to millennials, but retiringbaby boomers also see co-housingas a way for “continued personal independence while maintaining community ties.”

Learning about coliving’s intergenerational appeal is what did it for me. Coupled with coliving’s ability to directly address the affordability crisis plaguing much of our urban environments, I was convinced.

Striking the Right Chord

According to Christopher Bledsoe, co-founder of Ollie, “an estimated one-third of the interest that coliving receives is from non-millennials.” Post-World War II housing market trends changed the landscape for homeowners and investors alike, but “communal living in its various forms—from tribal villages, to communal kibbutzim, to residential hotels—has a far richer history in human society.”

Although there is certainly a strong value proposition for investors—coliving eliminates unnecessary space and spreads living expenses across many occupants—Bledsoe believes “the true promise of coliving reaches far deeper—a form of disruption driven by a human-centric value chain wherein technology is merely a means to an end rather than the end itself.”

Through Ollie,Bledsoe and his cofounder“vowed to measure success not by how effectively [they] connect … homes to the Internet of Things or … users to their devices, but rather by how well [they] re-connect humans to one another, the Internet of People.”

Innovations & Trends Driving Coliving

“Cohabitation isn’t new. What is new is people trying to find the market opportunity and actually build a business out of it. And scaling while building a genuine community,”said Unsettled cofounder Jonathan Kalan.

Anil Khera, founder and CEO of Node,notes that “Coliving 2.0”bridges “the gap between co-living and multifamily/PRS, creating an entirely new market segment that will attract creative types, entrepreneurs, freelancers, and professionals who are not quite ‘digital nomads’ but are rather ‘global citizens.’”

Coliving is gaining in popularity due to rental prices. The nation’s largest city, New York, has pledgedsupport for the coliving movement. City officials aim to use theShareNYCpilot “to create new models of shared housing that will bring down construction costs and incentivize the creation of more affordable units.”That will ease the crunchon the “More than 436,000 single adults living in New York in 2015 [who] were rent-burdened (30%+ spent on rent) … according to an analysis by New York University’s Furman Center.” Gunther Schmidt,Medici’s CEO, notes“the cost of living in a co-living dwelling is about 10-20% lower than the price of a studio apartment.”

Coliving will eventually integrate with coworking. As coliving, coworking, and retail inevitably integrate the industry will have an entirely new meaning for “mixed-use.”

There has been a huge shift in thinking in the multifamily sector. The Collective and Ollie (whichrecently raised $50 million) are underwritten as multifamily, not student housing. The ink is still fresh on a$300 milliondeal forQuartersby Medici Living Group, Europe’s leading coliving developer, to bring 1,300 units online in the United States—that’s after the groupraised $1 billionto put 6,000 beds in Europe.PMGx also plansto offer up to 7,000 beds in 3,500 U.S. apartments over the coming years.

On a personal level, I have always been very concerned about the lack of affordability in our housing stock. I am rooting for coliving as a key quiver aimed at this crisis, as well as a vehicle to drive deeper innovation in the real estate sector.

Given the vast opportunities unfolding within coliving, we will see the rise of a new real estate asset class for the first time in a very long time. Coliving is not a passing fad, but rather a trend with real staying power and massive room for growth. Coliving represents a means to increase NOI per square foot, a type of communal living experience that is and will be sought, and a path toward addressing what many believe to be societies’ great risk: loneliness. As such, the impact of a new asset class cannot be understated.

After spending 30 years in the real estate PR industry, Michael Beckerman launched The News Funnel, the largest content platform in the real estate industry. On the side, Michael shares his thoughts, opinions and practical advice about content marketing for the real estate industry on his blog.